Global Insurance Outlook to Watch Out For This 2024

In today’s dynamic global landscape, the insurance industry stands at the intersection of numerous transformative forces. Nowadays, these include the aftermath of the COVID-19 pandemic, the destructive effects of current wars, escalating tensions among major global players, rising interest rates, and growing inflation.

This article explores today’s complex market dynamics and their effects on insurance providers’ plans for growth and transformation, as well as their products, investments, and financial performance. Specifically, it delineates key takeaways from different reports for 2024’s Global Insurance Outlook.

Life Insurance Sector Developments

Life insurers can anticipate a positive profit outlook that’s driven by four key factors. These include enhanced investment returns, the normalization of COVID-19-related claims, reduced risk associated with pension and annuity premiums, and more stable earnings due to implementing the IFRS 7 accounting framework this year. 

A 4.3% growth in savings premiums in emerging markets is anticipated, with significant momentum expected from emerging Asia. Projections indicate the global life insurance sector’s share of risk business will stabilize at 23% by 2028, compared to 22.3% in 2022. 

Although global risk premiums are estimated to grow by 1.7% in 2023, this is below the long-term trend (CAGR 2011‒21: 4.2%). Notably, the protection business is slowing down in Western Europe and North America as pandemic-induced risk awareness gradually diminishes.

Europe Faces Higher Risk of Recession than the US

The recent conflict between Israel and Hamas in October 2023 has introduced additional uncertainties to the global economy. With above-target inflation and ongoing economic resilience in certain advanced economies, central banks are expected to maintain restrictive policy interest rates for at least two years.

It’s reported that the full impact of these higher interest rates on the real economy is yet to be fully realized. What’s certain is that for businesses, the increased cost of capital and labor input could lead to shrinking profit margins, potentially resulting in layoffs. This, alongside other factors, will make Europe and other major economies like Germany, which are already experiencing contraction, key underperformers in the next two years.

Continued Digital Transformation of The Insurance Landscape

Digitalization in insurance isn’t simply about making consumers shop online, allowing them to gauge between life insurance vs AD&D and the like. It’s about the transformative power of digital technology, including advanced analytics and digital tools, in enabling life insurers and their agents to shift from transactional roles to more expansive, relationship-focused interactions with consumers.

By modernizing systems, there’s potential to leverage alternative data sources for quicker application underwriting and processing. This can lead to smoother cross-selling, personalized customer experiences, enhanced engagement, and faster launches of new products.

Predictions suggest that by 2025, integrating AI and machine learning will enhance labor productivity by approximately 37%. This improvement will come from reducing or streamlining manual tasks, allowing existing workers to contribute more value. 

However, achieving this shift will likely still necessitate reskilling and upskilling efforts. This appeal extends to the existing workforce and to potential job candidates seeking a career path with growth opportunities.

Furthermore, embracing digital transformation can foster improved connectivity and collaboration with industry and non-industry partners throughout the value chain. This includes services for lead generation and the introduction of ancillary products that contribute to comprehensive coverage, spanning wellness, wealth, health, and more. All of these enhance the customer experience and create additional avenues for profitable growth. 

Group Insurers’ Shift Towards Digitalization

There’s a strategic shift among group insurers toward digitalization and connectivity in the post-pandemic landscape. As the pandemic’s influence wanes, the growth of group insurers in the coming years is expected to align closely with economic, employment, and wage trends. 

However, those aiming to surpass market growth may encounter challenges in diversifying product portfolios. This is particularly true with voluntary offerings that can contribute to higher premiums and margins.

It’s reported that 45% of surveyed employees express a strong likelihood of participating in more voluntary benefits offered by their employers in 2023, compared to 38% in November 2021. This includes critical illness, accident, disability, hospital indemnity, and supplemental life insurance.

Group insurers are also adopting innovative strategies to improve client experiences on digital platforms, emphasizing self-service capabilities. In the ongoing shift towards widespread digitization, HR organizations are leveraging financial products to positively impact individuals’ mental, physical, and financial well-being in a comprehensive and engaging manner.

Investments Turned More Crucial Component of Industry Returns

In the Property and casualty insurance sector, a substantial reevaluation of insurance risk in 2023 will contribute to an estimated 3.4% global premium growth this year. However, this growth is expected to ease to 2.6% in 2024 and 2025. Projections suggest that the impact of economic inflation on claims will decrease further over this period.

Non-life insurance profitability is predicted to improve, reaching around a 10% return on equity (ROE) in 2024 and 2025. This stands significantly above the 10-year average of 6.8%. These profitability enhancements are attributed to higher investment returns from the elevated interest rate environment.

Additionally, improved underwriting results are anticipated due to more appropriate premium rates in both commercial and personal lines. Current investment returns in the non-life segment have already exceeded 3.3% in 2023 and are projected to rise to approximately 3.7% in 2024 and 3.9% in 2025. The sector is further supported by disinflation and enhanced terms and conditions, which are expected to counteract the effects of inflation on claims costs increasingly.

Final Thoughts

The current state of the global insurance industry is characterized by dynamic shifts influenced by geopolitical, economic, technological, and consumer-driven factors. As it plays a pivotal role in providing financial security and contributing to sustainable development, it is crucial to navigate these changes with adaptability and strategic foresight.